Education / Schools, Law Schools, Money, Student Loans

When The Kids Come Home This Christmas, Talk About Their Debt

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I like it when the mainstream media drops by to take a look at the student debt crisis. I’d like to think that, unlike the housing bubble, this impending crisis can be avoided with sensible government regulation and individual actors making smart decisions about their own financial futures.

The government regulation is, strangely, the easy part — Congress will care that younger Americans are being crushed under their own debt load, or it won’t. This seems to me like a non-partisan problem. So if our elected officials get a clue (a pretty big “if”), then perhaps something positive will happen.

Getting individual actors to behave in their own economic self-interest is the hard part. Trust me, I talk to students thinking about going to law school almost every day. These kids seem to be allergic to facts and figures. But maybe with enough media spotlight, families will actually start thinking about how their kids are going to pay off their debts, and behaving rationally.

There was a big article on MSNBC.com yesterday showing just how far we have to go, as a country, to get the student loan crisis under control…

When I rail against the educational racket being practiced by so many law schools, readers remind me that the problem really starts in college. Parents pay and kids borrow exorbitant amounts of money to get degrees that seem to confer no practical economic benefit. And we all know that so many people who go to law school end up there only after they realize their undergraduate degrees were functionally useless.

The MSNBC article focuses on one family and their choices:

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The Kuipers’ nest is already half-empty. Chris is a college freshman, studying engineering at Calvin College, a private school in Grand Rapids, Mich. Kaylee is a junior, also at Calvin, where she recently switched her major to international development after a trip to Africa left her with a keen interest in travel.

Hold that thought in your head: family struggling to send their two kids to college (and they have two more on the way), daughter is majoring in… “international development.” Got that? Okay, let’s continue:

“We went around and we visited a bunch of different tribes and villages and just learned about what they were doing for development,” [Kaylee] said. “We got to do some fun things, like a safari. And we just, like, studied the land.”

It hasn’t been easy for the Kuipers to save for college, especially after putting their kids through parochial school. Rick drives a garbage truck, at work every day before dawn. Tami commutes an hour each way to a law office in downtown Chicago, where she’s a paralegal.

Your dad drives a garbage truck and your mom busts her ass as a paralegal and you, you are majoring in international development? Because you went to Africa once? I went to Europe once. It was pretty neat. I particularly enjoyed seeing all the castles. But I didn’t come home and change my major to Folklore and Mythology (an actual major at Harvard College) because I’m not a freaking trust fund baby. I had to pay some minimal attention to my financial future.

Kaylee, a daughter of working-class Americans, apparently feels no such pressure:

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“I don’t really know how much (debt) I have,” [Kaylee] said. “My mom handles a lot of it for me. … I just feel like I’m in the career field that I love, so it’ll somehow work out.”

Ladies and gentlemen, meet future law school student Kaylee Kuiper. Let’s see how much she loves this career field when she’s the one trying to put food on her table on a dollar a day. Maybe she’ll try it for a year and then somebody, probably her paralegal mother, will tell her that becoming a lawyer will allow her to pursue a career “international law.” It won’t be her mother’s fault — from her perspective, the lawyers in her office are doing a lot better than she is. So Kaylee will go to law school and she and/or her family will end up doubling down on the educational bet. Three years later, Kaylee’s debt will be approaching $200,000, and she’ll be trying to get firms to offer her an “international” law job… whatever the hell that means. Of course, even if she gets a job, she won’t “love” her career field anymore. And we’ll have another bitter associate who is in the profession only for the money but feels like she’s serving a term of indentured servitude until she can get out and do what she really wants to do with her life. And partners will wonder why she looks like she’s about to slit her wrists when they tell her about her crappy, crappy bonus.

(I wrote that entire paragraph without taking a breath.)

And that’s why we have figures like these:

Americans now owe more on their student loans than they do on their credit cards — a debt fast approaching $1 trillion with no end in sight…

America’s student debt at the end of 2010 is nearly $880 billion. That number is growing by more than $2,800 dollars per second.

And to my mind that whole process starts with some 20-year-old taking a trip or having an experience and going back to school with no economic plan whatsoever. When did American parents lose the ability to tell their kids: “No. That’s stupid. You’re going to be an engineer like your brother, and that’s that.”

The process ends, of course, with a debt that is non-dischargeable in bankruptcy (absent a showing of undue hardship):

Alan Collinge, an activist and author, who drew on his own student loan default to found the group StudentLoanJustice.org, says the student loan crisis is potentially far worse than the mortgage crisis.

“A defaulted home mortgage borrower — and don’t get me wrong, it’s a horrible outcome — they walk away from their house wearing a barrel and not much else,” he said. “In the case of student loans, there is no walking away.”

Unlike most other forms of debt, student loans carry almost no consumer protections and little ability to refinance. By law, they can’t be wiped out in bankruptcy. Those laws were passed in response to the last student loan crisis in the 1980s. But Collinge believes it created a system he calls predatory.

Is it a predatory system? Absolutely. But there are way too many students and families eager to put themselves in the position of being “prey.”

You can’t help people who won’t help themselves. Kaylee Kuiper has working-class parents and is a college junior majoring in international development at Calvin College in Grand Rapids, Michigan. The next economist who tells me people can be expected to act in their own rational self-interest is getting punched in the mouth.

Student loans leave crushing debt burden [MSNBC.com]

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